Japan July manufacturing contracts for third month, output fall deepens: PMI

TOKYO (Reuters) - Japanese manufacturing deteriorated for a third month in July, a revised survey showed on Thursday, offering another sign of how trade protectionism and slower global growth are denting the economy.

FILE PHOTO: Employees work an assembly line at a factory of Glory Ltd., a manufacturer of automatic change dispensers, in Kazo, north of Tokyo, Japan, July 1, 2015. REUTERS/Issei Kato/File Photo

The final Jibun Bank Japan Manufacturing Purchasing Managers’ Index (PMI) was up a notch at a seasonally adjusted 49.4 compared to 49.3 in June, but stayed below the 50.0 threshold that separates contraction from expansion for a third month.

The July final reading edged down from the preliminary 49.6.

Factory output contracted for a seventh month and slipped at the fastest pace in four months, suggesting the production slump hitting the export-reliant economy was firmly taking hold.

“Forward-looking survey indicators suggest that manufacturers in Japan are set for another difficult quarter, as firms scaled down stocks and input purchasing to keep a lid on costs,” said Joe Hayes, economist at IHS Markit, which compiles the survey.

The weakening July reading fits with official figures, such as for industrial production and exports, showing the economy is feeling the pinch from the U.S.-China trade standoff, slower Chinese growth and demand weakening globally.

Individual items in the PMI report further underlined the gloomy outlook for the world’s third-largest economy.

Total new orders and new export orders again showed shrinkage, at 48.1 and 47.6 respectively, though at a reduced pace compared with June.

Firms’ purchasing levels were at a three-year low due to the weakening output requirements and already-sufficient stock volumes.

“More signs that the manufacturing downturn has now become deeply rooted was apparent in prices data,” said IHS Markit’s Hayes.

“Output charges were reduced at the fastest pace in nearly three years amid increasing efforts to stimulate sluggish demand.”

Employment offered a slightly brighter picture, with the jobs index edging up to a three-month high, though backlogs of work hovered just off more than six-year lows touched in June.

Reporting by Daniel Leussink; Editing by Richard Borsuk